The game begins with Kara Zor-El's and an infant Kal-El's escape from Krypton during Brainiac's attack on the planet. Aided by Kara's mother, they manage to escape aboard pods headed to Earth, but debris from Krypton's destruction knocks Kara's ship off course. Years later, prior to the events of the first game and following the formation of Superman's Regime, Batman and Robin attempt to stop the Regime from rounding up Arkham Asylum inmates for execution.

After defeating Cyborg and Wonder Woman, Batman fights Superman, but fails to dissuade him from continuing his extreme measures. Finding Superman's methods more in line with what the League of Assassins taught him, Robin then joins the Regime, executing Victor Zsasz as a show of trust. In the present, five years after the fall of the Regime, Batman and the Insurgency are attempting to rebuild society. However, they learn of a new faction, the Society, composed of villains spearheaded by Gorilla Grodd, who seeks global domination, prompting Batman to send his allies - Black Canary, Green Arrow from a parallel universe, and Harley Quinn - to stop them.

In Slaughter Swamp, the group defeats Poison Ivy and Scarecrow and forms an alliance with Swamp Thing, but the villains escape. Subsequently tracking them down to Gorilla City, the team fights them again, defeating Catwoman and Bane, before Doctor Fate arrives to warn Green Arrow and Black Canary of an incoming threat towards the planet. After defeating Grodd, the pair are abducted by Brainiac, the true mastermind behind the Society, who reveals his intentions to capture Superman and add Earth to his collection of shrunken planets.

After Brainiac takes over Batman's communications hub, Brother Eye, Batman searches for other allies to help defeat him. While Catwoman, actually a double agent for Batman, rescues Harley in Gorilla City, Flash joins Batman and battles Captain Cold, Deadshot, and Reverse-Flash in New Metropolis. Meanwhile, Green Lantern is sent to Atlantis to gain Aquaman's assistance, defeating Cheetah, Bane, and Atrocitus, who tries to persuade him into joining the Red Lantern Corps, in the process.

Though reluctant at first, Aquaman agrees to help when Brainiac attacks Atlantis. Meanwhile, Black Adam, Wonder Woman, and Kara (who was rescued by Adam years prior and adopted the Supergirl alias) attack the prison holding Superman, Nightwing, and Cyborg, in order to free them and restore the Regime. They defeat Blue Beetle and Firestorm before Batman arrives and forms a reluctant alliance with the remnants of the Regime to stop Brainiac, releasing Superman and the others so that they could help.

Cyborg, Catwoman, and Harley go to the Batcave to free Brother Eye from Brainiac's control and coordinate civilian evacuation efforts, defeating Poison Ivy, Bane, Deadshot, and Grid - a pure machine copy of Cyborg created by Brainiac. Wonder Woman takes Supergirl to New Metropolis, where she defeats Captain Cold, Reverse-Flash, Scarecrow, and Cheetah, and almost kills the latter, but Supergirl stops her.

She then goes to the Fortress of Solitude to confront Superman on the matter, and learns the truth of her cousin's tyranny. As Brainiac prepares to destroy Earth, having collected enough cities, the Insurgency and the Regime attempt to destroy his ship, but fail to get through its shields, and Superman is seemingly killed during the attack. The group concocts a plan to weaken Brainiac' shields by using Aquaman's trident as a conduit for the magic of the Rock of Eternity, and Aquaman and Black Adam leave to carry out this plan.

Although they are followed by Grodd and a brainwashed Black Canary, Green Arrow, and Blue Beetle, the pair defeat them, with Aquaman swiftly executing Grodd afterward. Aquaman is able to weaken Brainiac's shields enough for Batman and Supergirl to get aboard the ship. They are captured, but a still-living Superman rescues Batman and helps him defeat a brainwashed Firestorm and Swamp Thing, as well as Doctor Fate, who was forced to help Brainiac by the Lords of Order.

After Fate is freed from the Lords' control, Brainiac kills him and takes on Batman and Superman himself, but is defeated. Superman then takes control of the ship and restores most of Earth's cities, but permanently loses New Metropolis and Coast City.

The heroes are divided over Brainiac's fate: Batman, Flash, Green Lantern, and Supergirl want to spare him in order to restore New Metropolis, Coast City and the other cities, while Superman, Aquaman, Black Adam, and Wonder Woman want to kill him before he could cause more harm and use his ship to restore the Regime's rule over Earth.

A battle soon ensues between the two factions, and the player can choose which one to side with. After defeating each other's teammates, Batman and Superman engage in a final battle in the Batcave, and the winner is determined by the player's choice.